Ghost Policies Explained: Workers' Comp for General Contractors with No Employees

A ghost policy doesn't pay out anything. There's no coverage if someone gets hurt on the job. So why would a contractor need one? Because plenty of jobsites already require proof of workers' comp before you can even step on site, and California is set to make it mandatory for general contractors in 2028.

In this episode, ISC's Hillary Crockett, Wholesale Manager, walks through ISC's Ghost Policy & General Contractor Program with Pie, including what actually counts as a "true ghost" policy, how it works when a contractor has subcontractors doing most of the labor, and what can go wrong if it's not set up correctly. One broker on the call talks about a client who ended up with a $68,000 bill at audit time because the subcontractor paperwork wasn't handled right, which is a good reminder of why this stuff matters even though the policy itself doesn't cover a claim.

Also touched on: pricing and premium caps, how fast quotes turn around, which states the program is available in, and the certificate-checking step brokers should be doing before they hand one of these policies over.

Have a general contractor client asking about workers' comp? Check out ISC's Ghost Policy & General Contractor Program and get a quote started.

Learn more about ISC's programs at iscmga.com.

Ready to write more business? Get appointed today for fast quotes, dedicated underwriting support, and access to programs your clients need— call (760) 599-7242 or visit iscmga.com/get-appointed. 

Transcript

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Speaker 0:00

as she said, this is our, exclusive, ghost policy general contractors program, that we have with pi. you can go ahead and go to the next slide, Diana. So to go right into, what is a Ghost policy? A true ghost policy is an owner only, who is excluded with no additional payroll. this is typically needed, for jobs, projects, and also referred to as a paper general contractor. it's proof of work comp insurance for, state regulation or jobs that legally require it. And then as we go, if there's questions, please feel free, you can put them in the chat. Is that how you want to do that, Diana?

Speaker 3 0:41

Go ahead and put your questions in, comments in the chat, or you can even unmute yourself and we'll get your questions answered. We do have a formal q and a session afterwards, after the presentation if you'd like to ask there as well. So whatever works best for you.

Speaker 0:53

there's other scenarios that will be accepted into our program that aren't just, what we would call a true ghost. those can be owner only where the owner is included and a hundred percent of that work. Subcontracted. These are your already insured, 10 99 workers. this program can accept anywhere above 25% to a hundred percent of that subcontracted. 10 99 work. you can go to the next slide. this is for, high subcontractor exposure where otherwise you can't find coverage. and these subcontractors already would be insured. We can take up to a hundred percent subcontracted work. you can go to the next one. So for a little bit of our program details, the maximum size account is up to 120 5K in premium. for submission requirements, we do need that completed Accord one 30. We have a contractor supplemental on our ISC mga.com website. We have this page exclusively for the ghost program. we will request four years of currently valued lost runs. if there's not, and this is a new venture, then we will require a signed no loss letter. the contractor needs to have an active license in the state where they're performing work and, the entity needs to be filed in the state where performing work. we do not accept anything above a 30 feet, so anything over two stories, no depth below 15. We don't do stump grinding tree removal, structural erection. just framers, Some of our targeted classes are, lots of contracting artisans, masonry, plumbing, concrete. Carpentry, hvac, we do have a trucking option. this is a little specific. We are only looking for individual excluded drivers, which would be a true ghost policy for trucking. So it would be, an owner operator, single driver trucking policies where the insured is excluded and there is no additional payroll. most of those class codes like 72 10, the trucking, that other class not otherwise classified. But most, most contracting industries you can go to the next one, Diana. All right. It was short and sweet, but I am sure there are questions. Feel free, pass away.

Speaker 4 3:12

do you have a similar program? I've got a scenario with a, automotive service and repair using 10 90 nines and ghost policies for those folks.

Speaker 3:22

that might be a fit for us. I have seen one of those come through before. We can definitely take a look.

Speaker 4 3:28

Okay. And so are you, for those, let's say you've got, 15, 10 99 as an example, I'm just throwing a number out there. Each one of those have to set up a goals policy, is what you're saying, that it's a program for that company or how, how are you setting this up? What's the different there? So

Speaker 3:42

it would be for that insured, so their company say it's, Paul who has Paul's plumbing. the policy is for Paul's Plumbing.

Speaker 4 3:49

And so they can put all of their 10 90 nines on that policy.

Speaker 3:53

This isn't coverage for the 10 99 employees. This just accepts that business, even if they have large exposure of subcontractors.

Speaker 4 4:01

Okay.

Speaker 5 4:02

Go ahead Lamar.

Speaker 4 4:04

Yeah, I might be slow. I'm not fully understanding. Maybe the other questions are cleared up for me. My apologies.

Speaker 5 4:08

Yeah, so this is kind of more of my, question. So when you say like, I know you say it's a ghost policy, like it's basically covered No, nothing. It's just kind of just excluded covered just to kind of give you a piece of paper. So my concern was why are there like, and this is not like to be thrown it out there, but why are there like exclusions that you guys don't want, if it's literally a.

Speaker 4:28

That's a good question. I think that's probably has a lot to do with your, the carrier or their license for and where, and, different regulations. but I mean, this is growing. We've added trucking since we started this and I anticipate that we will have more additions as we go.

Speaker 5 4:43

Okay. I appreciate it, Dave. also what's the, what's the turnaround time as well? 'cause ISCI mean, I love you guys from the, you know, from the GL standpoint, but I know with like other submissions, it, it's normally like a quite a bit of a delay. and getting, getting quotes back, which as you know, in the name of the game is the one with the fastest quote torque normally gets the business.

Speaker 5:05

Absolutely. I appreciate that question. we, we are manual process. And so that time is not gonna be as instantaneous as, as our API integrations. we're working on that, that is coming. but for right now, our turnaround time, I would say is probably in the 24 to 48 hour range. if our submission is complete, that helps us a lot. we appreciate when we have everything that we're looking for.

Speaker 6 5:29

is there a pay as you go, pay as you go option.

Speaker 5:32

Yes. They're all, we've got, annual, monthly pay as you go, semi-annual. And when we send a quote, all of those payment options are already laid out with what the deposit amount would be, and payments per month. So you'll see that on every quote.

Speaker 6 5:48

And are there. payroll companies that you have to use or most, A lot of companies do business with pi.

Speaker 5:56

Yes, I believe that they use RPMI. Do they, is it requirement that we use RPM for payroll?

Speaker 7 6:03

Yes. I believe it is a requirement that the insured works with RPM if they would like to do payroll reporting.

Speaker 6:10

Thank you.

Speaker 7 6:10

confirm.

Speaker 2 6:11

I have a question. how would a contractor benefit from a policy like this? I don't quite see the benefit.

Speaker 6:18

Yeah. So in 2028, the state of California will actually make this a requirement to have a policy that is just a paper, contractor policy. this already in some states, this is a requirement. So while it doesn't really provide coverage for anything, it is going to be required by state and sometimes already by jobs.

Speaker 6 6:40

Usually if somebody gets hurt under worker's comp, it's gonna pay three parts, the disability, med payments, and life insurance. If the guy dies, does this policy doesn't pay anything or it does pay or,

Speaker 6:54

so these are minimum premium policies. They're not, charged at. A full amount. So it's whatever the state minimum is for a true ghost. so no, there isn't coverage if no one is included. Essentially it's just a paper to cover the business for a job. So there is not coverage for any of those?

Speaker 6 7:13

what happens if the owner's on the job working and they tell him he needs coverage,

Speaker 7:18

then that owner would look for a policy where he's included, which is still something that we take, in which case there is coverage, but in a true ghost where everyone's excluded, that doesn't exist.

Speaker 6 7:30

I'm sorry, Corey, go ahead.

Speaker 5 7:32

No, I was gonna give you a little bit of information. So Rich, this type of policy is literally designed for what it is. It's like, I don't know if you get too many contractors, but contractors would basically come to you and say, Hey Corey, I have no payroll. All my sub have, they have their own insurance. I literally just need a piece of paper to show. That I have workers' comp, but we don't need to cover anything. So it's literally a true niche. And that's why I'm saying like ISC, they're doing the right job with having it, because I'm not saying it's the best policy, but it's, it's literally a need in the market because most contractors, as you know, workers' comp could be, you know, four or five grand. And most small businesses don't really have that, you know, that capabilities to afford something like that. So if this price comes in at about a thousand dollars a year, I mean, it's a great niche. So that's where I think the disconnect is at, is like, yes, it doesn't cover anything, but for the errors and admissions side of it, I would just literally tell a client, like, this is just a piece of paper to show that you have some type of coverage.

Speaker 8 8:28

Oh, if the subcontractors. Don't have, if they have the general liability, that's fine, but if they don't have the workers' comp, the subcontractor, then PI is gonna essentially tack on the additional premium for those subs. Is that correct?

Speaker 8:43

That is correct, yes. So a true ghost is minimum premium, no payroll for employees would obviously increase that. Therefore,

Speaker 8 8:52

therefore, if they suffer a loss, the unfortunate cause, 'cause it's a worldwide type policy. It's gonna cover the loss of the sub, which is the bigger issue. But I totally get what you're saying. And this is definitely a great deal to kind of probe, the requirements.

Speaker 9:11

Thank you, Corey, for that explanation.

Speaker 4 9:12

is this available to, sole proprietors?

Speaker 9:16

Yes.

Speaker 4 9:17

Generally speaking, you'll have a company that has their work comp policy.

Speaker 8 9:22

But

Speaker 4 9:22

bring in guys and those guys don't have work comp. So to protect my client, you can go to the state and write a ghost policy for that person who's coming in as their own business, quote unquote. my understanding is ISC now can write that type of exposure. It's a ghost policy, you know, in any other form. So those guys that are coming into my client's business that don't have work comp, I can write them a ghost policy through ISC.

Speaker 9:54

That is correct, so that they have a paper to provide to the job showing that they have coverage. as a requirement to bind, we do request, a letter of attestation be filled out and signed by the insured. And this is saying that I do not have any employees. There is no payroll.

Speaker 4 10:10

Understood. Perfect

Speaker 9 10:11

question.

Speaker 10:11

Yes.

Speaker 9 10:12

Hi, Henry Brads of Short Risk Management. if an individual takes a post policy and he has no employees W2 exposure, but say he's working with, you know, he gets a contract and he needs to subcontract some 10 99, exposure. As long as those individuals have their own ghost policy, will they get picked up on the other guy's audit? Or do they need to have actual coverage at that point? Those subcontractors,

Speaker 10:41

so those sub,

Speaker 9 10:42

They're basically all independents at that point, right?

Speaker 10:45

Yes. So independent contractor, subcontractor, 10 99 workers, these all fall into the same umbrella. they should be self-insured, they should be covered. And so there is no exposure to the insured.

Speaker 9 10:58

So as long as let's say a work comp umbrella, right? It's a ghost policy. It's registered to the LLC, whatever the case may be, or sole proprietor. And, during, the season, he gets a contract kinda large. So he has another three other subcontractors that he brings on to get the job done. No, but they all have their individual. Policy where they all kind of like excluded themselves from those benefits, but they have it filed with the state, so they kind of like keep their own liability. Nobody's falling under anybody else's umbrella. Correct.

Speaker 11:29

Yes. And I mean, as they go through their policy term, they can use that paper for all jobs as long as there's no employees. If that changes, then we can update the policy.

Speaker 9 11:39

Oh, we can include that at that point. Okay. Excellent. Yes, we can

Speaker 11:42

endorse the policy to include, payroll, if there is payroll eventually.

Speaker 9 11:46

So basically like, for the small guy, one man, one truck. Who's looking to do a contract, but the contractor's requiring him to have a workers' comp, not the state, just per se.

Speaker 11:57

Yes.

Speaker 9 11:58

that would be a great solution for him?

Speaker 12:00

Absolutely, yes.

Speaker 9 12:02

is it throughout the states all 50, or is it limited to certain states?

Speaker 12:07

We were only excluded in, I think 12. obviously the monopolistic and, I have a list if, the map is on here and on our website, but not Connecticut. Hawaii, Idaho, Massachusetts, Maine, Minnesota, Montana, Nebraska, North Dakota, New York, Ohio, South Dakota, Washington and Wyoming are the only ones we're not in yet. We're expanding, so that will change.

Speaker 9 12:32

I do Pennsylvania, New Jersey, California, so the only one is New York really, that I wouldn't have access to.

Speaker 12:38

Yeah.

Speaker 9 12:39

Perfect.

Speaker 12:40

We like those.

Speaker 9 12:41

That's great. Good luck in New York. I know. I got all the good states, right? That's real tough.

Speaker 6 12:48

No, the good, the good. New York. Unbelievable.

Speaker 5 12:51

So can I give you guys context? Like I write in all 50 states and literally I've been coming. New York's been, at first it was hard, but I'm starting to get a little luck. I think we all should kind of coordinate together to figure out some, Hey, who are you going to and who are you going to? 'cause I think that might help. Okay.

Speaker 6 13:05

as far as work comp, you're getting somewhere.

Speaker 5 13:08

I am getting some stuff though, but I also have like a lot of markets, like I'm one of 'em dudes that I send out a lot. Just checking different markets.

Speaker 6 13:15

are they contractors you're writing there?

Speaker 5 13:18

Yeah, it's more like the landscapers. It's like the painters, right. You know, It's not really roofing like, I mean, I always tell 'em like, look, go to the state. But other than that, these

Speaker 6 13:26

easier contractors. Okay. if the state wants 'em, they just lower the price enough so nobody else can get 'em.

Speaker 10 13:34

Hey, if I could chime in. I'm from Illinois. I've been doing workers' comp for almost three decades. These are great policies specifically for those mom and pop that the states don't require you to have, workers' comp if you don't have any employees. But be very careful because your e and OS will also be involved because you have to know how to structure it. So a ghost policy, whether they're incorporated or sole proprietor, you must name every single one on the corporation, right? If you don't, once they get audited at the end of the year. And, they find out that there was, other people in the corporation, they will get a bill. They get picked up. So make sure that you guys are underwriting this correct, because that's a good pointer,

Speaker 9 14:16

man.

Speaker 10 14:16

Yeah. You know, will fall into this. And the way we're, ghost policy, more specifically, the way you could explain it is it's pretty a dormant policy. If they were to hire somebody in between that term, they will get a bill at the end of the year. make sure, if you guys are not familiar with it, understand that a ghost policy doesn't mean that you know what, you're just gonna pay this flat amount. And then at the end of the year when your audit comes and you got all these 10 90 nines and you didn. you didn't get workers' comp from them, right? Because if they do, if, let's say for example, you got a sole proprietor, did three job subcontractors, three different ones, and he didn't get a deck page from them showing workers' comp, he will be paying out of his workers' comp. Right? And we're not talking couple thousand bucks we're some, I had one guy that, with $68,000 bill, so make sure that you guys are aware of how these are structured.

Speaker 8 15:12

Correct.

Speaker 10 15:13

Yeah. They're always gonna be audit. There's no exception. Yep. That's always gonna happen. So don't get your e and o involved by not explaining it to the client because they're just gonna take it. 'cause I go through the state pool, I'll tell you right now, they're 1500 bucks for a hundred thousand or a million is 1650. That's it. The flat fee.

Speaker 2 15:31

Yeah.

Speaker 10 15:31

So my questions here, Hillary, is what type or, commission on this.

Speaker 15:36

we are giving 7% to our agents on this. We charge, a 1 95 flat broker fee.

Speaker 10 15:43

Okay. And we could add, broker fees in it as well. Good luck guys.

Speaker 9 15:47

Yeah, I tell you what, I'm pretty excited, man. This is exciting. I've been waiting for this. when I got into insurance, I started with workers' comp and I started with a captive agency where we developed a work comp, product just like this. So I've been looking for a solution to be honest. and I've been waiting for you guys to come out with it. 'cause I know I sat through a meeting with you guys, a while back, one of your reps and. They had brought up trucking with the ghost policy and I, I quickly raised my hand. I said, that's not true.

Speaker 3 16:16

Yeah.

Speaker 9 16:17

have it. So I'm pretty excited. Yes, because I have a great market for that. great following of, clients that require that option.

Speaker 2 16:24

Mm-hmm.

Speaker 4 16:25

I'll throw this caution out there as well. So, if you have your larger clients and you're doing this for your larger clients, for their subs. Make sure that those certificates are real. I just had a claim where it was a fake certificate and there was damage, and it just caused a whole cascade of problems because Oh, yeah, you always have to

Speaker 9 16:45

cross-reference those things when you get, it's incredible how they can get their hands on some of these certificates, I don't know how, I guess the internet or whatever the case may be, But, yeah, you always have to cross reference. That's definitely, yeah. once you're dealing with subcontractors I sit with all my clients for at least an hour, two hours, before I hand them, the ghost policy. I make sure that they understand, like you said about the audit process, that they are gonna be, it's an audible policy. it's gonna be an annual audible policy. they need to collect all the certificates from, all their. 10 99 subcontractors and provide 'em to me so that I could cross reference and confirm that that's actually a genuine certificate. And then, to avoid those, surprises at audit time. And just to let me know, if he's gonna add any W2 exposure so that we could add it onto the policy at that time.

Speaker 8 17:34

Yeah. Anybody, I don't mean to cut off, but, Paul Angeles here, south Florida. I just put up on the link, for Florida where NCCI, regulated, if you will, like many other states. Here's a link to the Florida website. anybody that has a Florida Workers' Comp policy is to the state of Florida. You click that link, you just put their FEIN number and it'll show you the current policies. Even all the prior policies, I believe they go back all the way to 2003, which is right when I started. So that's a really helpful link in Florida. I don't know if any other states have that.

Speaker 9 18:09

Yes,

Speaker 8 18:09

I know Texas has something similar, but it's not registry to public. I'm licensed also in Texas, I don't that this helps out a lot to verify for proof of insurance. People say they have it. There's a lot of fraud up here, ISIS tapping into all this stuff. So Florida State and Desantes, they made it a real clear picture here for everybody to verify whether it's true or not, and it's active. And update it within the 24 hour range. So you bind the policy by the next business day, sort of say the website will be off. So that's a nice way of check.

Speaker 18:43

Thank you for sharing that.

Speaker 9 18:45

very good, Paul. Thanks, man. The every state has it. New Jersey has it. New York has it, California. They all have their, workers' comp department, and those, the policies do get filed with the state, so they should appear.

Speaker 18:54

I see several questions about, what is the general policy cost, and that is incredibly state specific. California is definitely higher. I've seen a range of $450 to around 3,300, and that typically falls in California, that higher premium. and then obviously it's also state specific and class code specific.

Speaker 10 19:13

I got a, I got a question 'cause I'm actually registered as a producer pi. Is this an exclusive ISE product through pi? Yes,

Speaker 19:21

yes. This is exclusive to us. It's A BOR protected.

Speaker 9 19:24

Who is the carrier, if you don't mind asking the paper.

Speaker 19:27

Pi.

Speaker 9 19:28

Gotcha.

Speaker 19:29

Yes, we are with

Speaker 9 19:29

When I started the program back in 2016

Speaker 19:33

mm-hmm.

Speaker 9 19:33

we started with guarantee, in out of Florida. They went the receivership, we almost lost the product and we were able to, partner with, Pennsylvania manufacturers and that the product actually still is up and running, So this will be great 'cause this will gimme, you know, and then on the market.

Speaker 19:51

Yes, for sure. there's another question on here, about looking at a specimen policy. I'll see what I can do about that and if we can release something like that, we can get it on our website. Just to give an idea, admin requirements or to avoid surprises at audit. I think that you guys did a great job of answering, how to avoid surprises at audit. So thank you for chiming in on that. Definitely collecting those subcontractor certificates. If there are future, employees, W2 employees, they can be added. So this is like described a shell policy and we can endorse. And just to add also, I know these are contractors. This is an autopay, program. So they will be required to make that initial payment, which will then be on autopay. So I know some agents offer a service of paying that down payment for them. I'd advise you not to do that as it will continue to, to do auto payments from whatever account you use. the. I know sometimes they'll start a job, think they don't need it anymore, and then cancel it and come back. We've had that scenario several times. Don't wanna see a ton of it, but that is a possibility. It's not going to be declined due to, previous cancellation within our program. So,

Speaker 9 20:59

quick question, right. from my experience, when you file with the state to workers comp policy needs to be paid in full when you're getting a ghost policy, so you guys are absorbing that cost and providing a installment option? Yes.

Speaker 21:13

We're offering payment plans. So even on those $450 policies, we've got a 10, 10 installments plan. 'cause we recognize that these are contractors and they don't always have the cash, so it just makes the most sense to have options for them. That work.

Speaker 9 21:29

That was the actual, game changer. We financed it for them because they didn't have the cost and that just. I mean, I grew that program up to about an 8 million.

Speaker 21:38

That's awesome. that's our prevention for the cancellation and then picking the policy back up for each job that you have is that we're making it, simple, easy as pie, if you will, to make payments and work with them.

Speaker 10 21:51

That's really good. How quickly are we gonna be able to start quoting.

Speaker 21:55

we're live, we're ready to go. we've been active for a bit now. So we are, good with process. We're working faster than we were, and we're only going up from there. You'll see lots of tech-driven initiatives from us with this program as we build it out. So I'm excited for that. we're manual right now, but we're ISC and that's not always how we stay. So excited for the future.

Speaker 9 22:18

So that was my, my next question real quick, like turnaround time. So you, if we process right now, you're saying everything's on a manual side? Yes. So we enter in the information, we submit a, a WC one 30. And, we're looking for a ghost policy. How, how fast would that turnaround?

Speaker 2 22:32

Mm-hmm.

Speaker 9 22:32

But how long does it usually take to get that?

Speaker 22:36

Another that we need there. probably about, for a true ghost, probably 24 hours. It's the ones with payroll that we require, an underwriter review and there's gonna be some follow up questions on those. So the timeframe is really dependent on how quickly we get responses back to the questions that we have.

Speaker 9 22:53

Perfect. Excellent.

Speaker 22:54

Is there any other questions before we wrap up?

Speaker 10 22:57

Hillary, I got a specific question. I got a not-for-profit, They got board members. no payroll. Is that something you guys could look into?

Speaker 23:04

this is contractor specific, so not-for-profit is not in appetite at this time. send me an email and I might have some other options for you outside of this.

Speaker 5 23:14

I was gonna also tell you, I got a nonprofit in New York, and it's, I got it through Great America for like $500 a year, and it's covering like four owners of the company.

Speaker 23:24

We also have, access to Great American and also a program with, AmTrust that is for nonprofits. So feel free to submit those to us. I love a good nonprofit.

Speaker 10 23:33

Thank, thank you guys.

Speaker 23:35

Thank you all for your time, and I'm looking forward to quoting some of these and winning them with you.

Speaker 6 23:40

Yeah, absolutely.

Speaker 23:41

Thank you.

Speaker 6 23:42

Thank you for your time.

Speaker 23:43

Will you be there, Diana?

Speaker 3 23:45

No, I won't be there in Florida, but we may have some representatives in Florida

Speaker 6 23:49

I saw that you guys are gonna have a booth there or something.

Speaker 23:52

thank you all. I appreciate the questions. Thanks

Speaker 6 23:54

for your time.

Speaker 23:54

was a great discussion.

Speaker 9 23:55

Thank you.

Speaker 23:56

All right.